Young investors want alternative products from their financial service providers

The trend: A 2024 Bank of America study of US consumers with at least $3 million in investable assets found that Gen Zer and millennial portfolios had three times the alternative investments as their older counterparts.

• For consumers ages 21–43, 17% of the portfolio on average is dedicated to alternative investments, versus just 5% for portfolios of those ages 44+. 

How we got here: Coming of age after the stock market roller coaster of the Great Recession may have scared away some millennials and older Gen Zers, per Yahoo Finance. They are instead drawn to banking products that let them grow their wealth “outside of the box.”

What products they want most: The wealthy Gen Z and millennial investors surveyed cited three alternative investments as the greatest opportunities for growth:

• Cryptocurrency: Young consumers, especially wealthy ones, are the most likely to trust digital currencies. And it's a boom time for crypto thanks to optimism around the incoming presidential administration, which could make the investment option even more attractive to this group.
• Real estate: It’s a popular investment among all age groups of banking customers, likely due to  its tax advantages, equity-building potential, and performance against inflation. It includes real estate investment trusts (REITs) and direct ownership of residential and commercial properties.
• Private equity: These investors fund private companies or buy public ones to improve and resell them for profit. Private equity offers higher returns than traditional stock markets but often involves higher risk, longer investment horizons, and limited liquidity.

What it means for banks: Traditional banks looking to win young investors’ business should emphasize alternative investment products in marketing material aimed at Gen Zers and millennials. They can also feature their more traditional, stock market-based options, though presentation will be key.

• TD Bank uses comedy and partial stock ownership to engage young investors in its marketing campaigns, for example.

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